Exec-pay disclosure rules in peril

Republican effort in House seeking repeal advances

Jun. 25, 2011 12:00 AMWashington Post

WASHINGTON - One financial figure some big U.S. companies would rather keep secret is how much more their chief executive makes than the typical worker.

Now, a group backed by 81 major companies - including McDonald's, Lowe's, General Dynamics, American Airlines, IBM and General Mills - is lobbying against new rules that would force disclosure of this comparison.

The companies, and some Republicans in Congress, call the comparison between the chief and everyone else in the company "useless."

But some Democrats and religious investors say the information should be issued to help investors make ethical investment decisions and highlight the nation's growing income disparity. Opponents of the disclosure, they say, merely want to hide the scale of outrageous executive-pay packages.

On Wednesday, a House committee approved a bill that would repeal the disclosure requirement.

Disclosing such comparisons "can mislead or confuse investors," said Rep. Nan Hayworth, R-N.Y., who filed the bill to repeal it and who counted three financial firms among her top donors. "It creates heat but sheds no light."

"The real reason House Republicans want to keep the typical worker's pay secret is that it may embarrass some companies to reveal that they pay their CEO in the range of 400 times what they pay their typical worker," said Sen. Robert Menendez, D-N.J., who added the requirement to the mammoth financial reform bill last year.

Income inequality has been growing rapidly in the United States since the 1970s, and recent academic research has indicated that the growth of executive pay is one of the key reasons.

Executive compensation at the nation's largest firms has more than quadrupled in real terms since the 1970s, according to research by Carola Frydman from MIT's Sloan School of Management and Raven Molloy of the Federal Reserve, even as pay for 90 percent of America has stalled.